tv Nightly Business Report PBS August 14, 2012 6:30pm-7:00pm PDT
>> this is n.b.r. >> susie: good evening. i'm susie gharib. tom is off tonight. a rebound for the nation's retailers-- they post their first monthly sales gain since march. but will back-to-school sales keep the gains coming? we talk with moms and kids about what they're spending this year. and turning patients into consumers-- we take a closer look at the medicare plan of congressman and now vice- presidential candidate paul ryan. that and more tonight on nbr. a comeback for the american consumer. thanks to a burst of buying in july, the nation's retailers posted their first monthly sales gain since march. the commerce department reported today july sales rose eight tenths of 1%. the government revised june and
may's numbers lower. economists welcomed the numbers, but say there's one thing that will get consumers to spend more-- jobs. >> relying on it which is relying on how much you need to invest, how much they will lead to higher. we thought the economy sold and would be bad for income growth and consumer spending fall back. >> susie: one retailer nailing it-- home depot. the home improvement chain posted better than expected earnings today, underscoring the recent strength we've seen in the housing market. profits rose 12% in the second quarter. it earned more than $1 per share, four cents more than analyst estimates. home depot said today it's more optimistic about the housing recovery, and it's seeing signs of stabilization. that's why it raised its earnings outlook for this year. retailers are now counting on
back-to-school spending to keep up the momentum. spending by families with students high school age and younger is expected to grow double digits to over $53 billion. as we continue our look at the back-to-school season, erika miller says what's on your kid's shopping list could determine which retailers get to the top of the class. >> reporter: mecca star murray and her grandmother are a retailer's dream. >> we're looking for notebooks, pencils, pens, all that, and getting ready for school. >> reporter: but they ended up buying a whole lot more. >> take them both. i mean, seriously, they are cheap enough-- take them both. >> reporter: many other shoppers are sticking to the list this year, buying only necessities. >> i like to get it done in one shot. i would rather come to one place at one time, get everything i need, then leave and never have to do it again. >> reporter: that still means big spending, because sister kyla is headed to boarding school. >> mattress pads, a shower caddy, hangers, a laundry bag.
>> reporter: what do you still need to buy? >> cosmetics and shampoos and toothpaste. >> reporter: the average household is expected to spend $688 on back-to-school items. interestingly, the households that shop online plan to spend nearly $200 more. part of the reason back-to- school spending is expected to rise this year is record elementary and middle school enrollment. the population of school-aged kids jumped substantially this year after flat-lining the past few years. more kids means more demand for notebooks, glue and backpacks. but the assistant manager at this kmart is optimistic about back-to-school for another reason. >> the economy is getting a little bit better. people are coming in more to the store, shopping more. we can definitely see it in our sales, how sales are improving-- not just in back to school, but sales in general. >> reporter: still, there are plenty of reasons back-to-school spending could prove disappointing. gasoline prices are rising, income growth is weak, and many
households are trying to slash debt. but, remember, back-to-school is all about the kids. >> everyone usually tries to buffer the kids. and on top of that, the low price points that usually go along with kids' products help to make it a little bit more resistant. >> reporter: retailers hope back-to-school spending will be strong, and signal even stronger spending during the all- important winter holidays. however, there is one wildcard between the two seasons. >> while back to school, we are subject to some negative news cycle as we get closer to the election, that will be over by the time we get to the holidays spending period. so, it could be a bit of a disconnect this year. >> reporter: that said, back-to- school spending is watched closely by retailers. it can often predict emerging fashion trends, and it gives the stores an idea of how heavily they need to discount in order to make a sale. erika miller, nbr, new york. >> reporter: i'm diane eastabrook in chicago. still ahead, i'll tell you how
the drought is affecting one summer staple, farmers markets. >> susie: on wall street, a flat day for stocks, and the averages flip-flopped between gains and losses. investors were encouraged by those retail sales we told you about, but discouraged by news that europe's economy contracted in the past three months. the dow inched up only three points, the nasdaq lost 5.5, and the s&p fell a fraction. our guest says there's been a cycle of "hope and despair" in the markets. he's stuart schweitzer, vice chairman of j.p. morgan private bank. so, should investors be focused on some of the good news going on in the u.s. or the bad news is going on in europe? >> well susie, of course we've got to be paying attention to all of it but i think the number one thing for investors to focus on is opportunity. and the opportunity that comes when prices are weaker. the reality is, this has been such a tough year, the news
flow's been really discouraging and yet, through last friday and it's pretty much the same through today, the s&p 500 is up over 13%. it's the second best year-to-date return in the last 15 years. and that in a pretty weak environment. >> susie: but you talk about hope and despair and right now investors are hoping that central bankers in europe and policy makers at the fed will do something to rescue the global economy, take some sort of action. what if they don't. now that's the despair pot of the equation. ipart of the equation. what is that going to mean for the market. >> i suppose if people are expecting it and the central banks don't dlifer then there will be some despair. that's break things apart. in the case of the u.s., this sme is growing. it's not growing gang buttal ter
style but it's growing. the housing picture also better as some people pointed out. and some this economy is beginning to spend stand a lite on its own two feet albeit the job picture is still disappointing. if the fed doesn't act the economy's going to keep going. the europe, ecb, definitely in my view needs to provide more stimulus. but they are right to expect that the countries that have been overspending and labor markets are inefficient and really where labor doesn't move around as it needs to, that there needs to be some restructuring to make those conditions. but i think the ecb will in the end provide more support. they've pretty well got to. >> susie: i thought it was interesting you told me earlier today that you've been warming up to buying some european stock and you were really avoiding
them not too long ago for individual investors, i know there are a lot of bargains out there but it still sounds a little risky. what do you tell your clients? >> well, it is still a little risky. we're prepared for further disappointment. it's been a continuing cycle of summitry, one after the other after another. and expectations get met and then dashed and it's just up and down. and we doubt that we're through with that cycle. but cheap prices cite opportunity and that's why i'm becoming a little bit more hopeful about europe because if we're going to have some of those cheap prices and if we're going to have the ecb ultimately come, that could be a recipe for gains on the european equities over time. >> susie: all right. we'll leave it on that hopeful. stuart thank you so much, shooter schweitze stuart swiertsz of j.p. morgan bank.
>> susie: standard chartered reached a settlement today with new york state banking regulators over money laundering charges. the british bank will pay $340 million to end a showdown with the state's superintendent of financial services. new york had accused the bank of laundering $250 billion worth of illegal transactions for iranian clients over the past decade and lying to regulators. as part of the settlement, standard chartered agreed to allow state examiners on site to oversee its transactions for the next two years. the deal means a hearing scheduled for tomorrow on
revoking standard chartered's state banking license has been called off. joining us now to talk more about this, brian gardner, washington analyst of keefe, bruyette and woods, the banking research firm. so brian, does the penalties fit the crime here? >> it's tough to say. it seems to and the penalty's not over yet. this is the new york portion of it. the federal government will weigh in sometime over the next few weeks. treasury, justice department and the federal reserve. what i'm happy about with this part of the settlement is that the revocation of the license was taken off the table. i think that would have been very counterproductive. actually very harmful to the new york economy and a bad signal to banks. so it's also tough to say whether the penalty fits the crime because the new york complaint did not detail exactly how much they alleged standard made off of these transactions. it was an unspecified amount in millions. they never said. but at least for standard and
the rest of foreign banks operating in new york, revocation did not come to pass. that's a good thing. >> susie: well you mentioned treasury, the federal reserve. do you think that more information's going to come out. and do you think that they will add on to any other penalties or fines or something like that. >> i think they probably have to just as a political act. it's tough to have an investigation into the entity and not come up with some additional penalties, whether it's monetary or additional compliance procedures. i'm sure the fed will try and beef up and add on to the compliance portion of the new york settlement today. we'll probably see some extra monetary damages as well. >> susie: you know this whole centered charter case stirred up a very firely debate between the u.s. and europeans about are u.s. regulators too tough on non-u.s. banks. so how do you, what are your thoughts on that and how do you think the brits are going to
react to this settlement? >> well two parts. one is that you know, u.s. banking law's a little bit different from international banking law in that we do have a series of sanctions and prohibitions on transacting with entities tied to terrorists link countries, iran being one of them. european countries, asian countries don't have the same regime. so foreign banks operating here are subject to our laws, but it's a different culture so that they have to be a little bit more careful. the other is post financial crises, where banks have shifted their attention much more to safety and soundness issue to proven lending and underwriting issues have i think probably taken their eye off the ball off of these type of compliance issues, and i think we're going to see more of these types of money laundering sanctions over the next few months. >> susie: well quickly, because this whole standard charter case also stirred up the criticism again that the public has that you just can't trust the banks. still a lot of bad behavior.
what does it mean. more regulation or better enforcement? i mean, what's the solution here? can you give me a 30 second answer on that. >> i can't say there's an easy solution. i think you're going to see more aggressive enforcement but at the same time a lot of the alleged acts by standard, and everything we've been looking at really are in the rearview mirror. these are acts that are taking place over a series of past years, not as current as right now. same thing as the live situation. these are allegations what was going on in 2007, 2008, not so much right now. a lot of this is still putting the blame on four, five years ago. >> susie: already. we'll see what happens. to be continued. ryabrian gardner, thanks so muc. >> thank you.
>> susie: governor mitt romney is attacking president obama in a new ad, saying the president cut more than $700 billion from medicare. the obama campaign calls that dishonest since the president is not cutting benefits. medicare became a major campaign flashpoint after romney tapped congressman paul ryan as his running mate. ryan is a leading voice for medicare reform. darren gersh takes a closer look at ryan's bold idea. >> reporter: paul ryan's medicare plan basically sends checks to seniors so they can choose their own health insurance. in addition to being patients, the goal is to make them better consumers, too. >> the central idea is to give health plans and, of course, the providers, doctors and hospitals and others, a relatively fixed budget for the year, so that
they know that instead of just prescribing more tests, doing more things, that instead, they have to find the best way to treat the patient in the most efficient manner. >> reporter: the critical question is how the payments seniors get from the government, called "premium support," changes over time. critics say the ryan plan's premium support will leave seniors short. >> because it doesn't keep up with health care costs, the difference-- that's going to be made up through higher co-pays, higher deductibles that seniors are going to have to pay. >> reporter: seniors will come out ahead if insurance plans are able to deliver a more efficient system. but the congressional budget office estimated the ryan plan would instead shift costs to seniors, leaving them paying far more than they would under traditional medicare. >> it is possible that something like that could happen, but that would mean that, truly, we are sunk in this country in health care. because that would mean that all of the waste and inefficiency
that everybody on all sides points to cannot be reduced, and that's an unreasonable expectation. >> reporter: the ryan plan does come with safeguards. insurers who take on sicker patients would get higher payments for the added risk. but critics say that risk adjustment may not work. >> you're inviting private insurers in and you're going down a very untested path, and the tests we do have shows that these private insurers don't give you a better product, many of them. they cherry-pick the healthiest seniors. they attract them and they leave medicare with a sicker population. >> reporter: here is one thing both president obama and congressman ryan agree on-- they want to limit the growth rate of medicare to little more than the annual growth rate of the economy. but ryan puts the risk of missing that mark on seniors, while the president would keep it with the government and, by extension, taxpayers. darren gersh, nbr, washington. >> susie: let's take a closer
look now at today's market action. that stronger-than-expected retail sales report rang up a positive tone for trading, even though the major market averages slipped at the close and ended mixed. despite the good news, the s&p 500 was unable to challenge its four-year high. it closed virtually unchanged, just off its lows of the day. we saw modest gains in the consumer staples sector, while the weakest group today and in the quarter so far was materials. leading the dow higher was home depot. as we told you, it reported better than expected quarterly results and gave new credibility to the housing recovery. shares of home depot surged over 3.5% to close at $54.71, and the stock is trading near a 12-year high. better than expected earnings from retailer michael kors also pushed that stock higher. a healthy pickup in sales, coupled with a rise in licensing revenues, helped to lift profits for the luxury chain. the stock surged more than 16%. kors is one of the few recent
i.p.o.s to hold up well. for more analysis on michael kors, visit our web site, nbr.com, and click on the blogs section for technical analysis by michael kahn. sticking in the retail space, estee lauder shares got a nice makeover today. the beauty products queen posted stronger results on a solid increase in revenue in all regions and all segments. shares of estee lauder rose over 9%, and the increase came despite a somewhat cautious outlook. the stock is now firmly in positive territory for the year. meanwhile, a number of internet newcomers like groupon continued to struggle as investors try to sort out their future prospects. shares of groupon sold off again, after the company's quarterly numbers were a big disappointment last night. the stock has lost a stunning three-quarters of its value since going public in november. down in sympathy today were angie's list-- it fell 16%. yelp and facebook saw more modest losses. shares of monster beverage got
energized today. investors reacted to word late yesterday that the energy drinks maker is doubling its share buyback plans. today, the stock gained 10% to close at $58.59, making the best performer in the s&p 500. internet darling google added more than 1% today, and is now trading close to a 4.5-year high. and apple continues to shine higher. it tacked on nearly $2 to close just below $632, and its within $5 of its all-time high. over in the bond market, that encouraging retail sales report caused a sell-off in treasuries. the yield on the ten-year bond rose to 1.73%. that's its highest level since may. investors sold government debt as they weighed the odds of more economic stimulus from the federal reserve. and finally, we saw a mixed finish in the most actively traded e.t.f.s. the ishares russell 2000 has been the laggard this week. and that's tonight's "market focus."
the worst drought in a quarter- century is frying corn and stunting the size of other crops. as diane eastabrook reports, you don't have to drive out to a farm to see the damage; you might see it at your local farm stand. >> reporter: sunny skies have blazed above the farmer's market in chicago's lincoln square all summer. >> hello. how you doing, sir? >> reporter: it's great shopping weather, but not so great growing weather. nathan matashehski says the drought is causing shortages of some vegetables. >> there's been a couple things that we went without for a
couple weeks like spinach, but next week, we'll have it back. >> reporter: the drought that's been baking the nation's bread basket all summer got its start back in early spring. lyon's fruit farm says peach trees and blueberry bushes got tricked by a blast of warm weather in march. >> everything blossomed early and, unfortunately, that weather didn't stick, and as soon as the temperatures went back to normal, all the blossoms froze. >> reporter: that's resulted in local shortages and higher prices. still, not everyone is complaining about scorching days and oppressive nights. bade farms says some of its flowers flourish in the heat. >> when we had those 90-degree nights, 93-degree nights and stuff like that, everything actually grows more because that's the time when they would normally contract, and they expand. >> reporter: still, if you savor the taste of summer, this year, your taste buds may come up short. diane eastabrook, nbr, chicago. >> susie: tomorrow on nbr, a popular back-to-school trend--
why more and more school districts are outsourcing those big yellow buses. and cisco, the maker of routers and gear that power the internet, reports quarterly results. we get the outlook for tech earnings and the global economy from c.e.o. john chambers. and finally tonight, an olympic moment here at the new york stock exchange. as the fierce five take the podium to ring the closing bell. there they are, the olympic gold medal winning u.s. gymnastics team-- mckayla maroney, kyla ross, allie raisman, gabby douglas, and jordyn weiber. all told, the ladies brought home five medals in london. in tonight's beyond the scoreboard, translating those medals into advertising dollars. here's rick horrow. >> reporter: the most valuable gold medal is the one worn by gymnast gabby douglas. she's poised to be the biggest marketing winner from the olympics. she could expect to earn up to $12 million over the next four years. procter and gamble may have gotten a relative bargain.
the company signed douglas to a deal before the london games. kellogg's pre-olympic deal was contingent on her winning gold. she did, and now gets the cereal box. nbc/comcast also deserves gold. despite complaints about tape- delaying high-profile contests, nbc averaged more than 30 million viewers per night in primetime, and likely generated a profit, despite the over- $1 billion cost for the games. the biggest disappointment of the london olympics was the ticketing process. the international olympic committee saw an embarrassing number of vacant v.i.p. seats, meaning more than a few national olympic committees, international federations, and sponsors failed to show up. then, there's questions over the billions great britain spent to host the olympics. as the torch gets passed to russia for the winter games in 2014, that debate will continue to burn brightly. i'm rick horrow. >> susie: that's "nightly business report" for tuesday, august 14. we want to remind you this is the time of year your public television station seeks your support. i'm susie gharib.